Partnership Design in Social Enterprise at MIT’s D-Lab

Late last summer I ran an online Partnership Design workshop with 2 agribusiness social entrepreneurs from Kenya, Peter Mumo (Founder of Expressions Global) and Dysmus Kisilu (Founder of Solar Freeze). In this post, I’ll take you through the process of how a pay-as-you-go irrigation service (Expressions Global) could collaborate with a cooled storage service provider (Solar Freeze). A collaboration which appeared ready to go, but actually wasn’t quite there yet. 

Partnership context
Peter, and Dysmus met as part of the Massachusetts Institute of Technology D-lab project on inclusive partnerships, which is a year-long learning lab on the topic of Co-Designing Inclusive Partnership Models. 

When Peter, and Dysmus were introduced to the Partnership Canvas during the first session as part of the learning lab, they were inspired to collaborate with their 2 companies, Expressions Global (EG), and Solar Freeze (SF). 

They were aiming for the same customer segments, smallholder farmers, and both companies could benefit from connecting their services. More, high-quality produce in stable supply from better irrigation, and trusty cold storage would mean more interest from well-paying (export) traders, and thus more interest from prospective smallholder farmer clients.

A few months after the initial workshop where Peter, and Dysmus met, I checked in on their progress together with Saïda Benhayoune, who is Program Director at MIT D-labs. We proposed an online workshop to apply the Partnership Design process, in order to analyse the current status of their collaboration, identify next steps, and put the Partnership Design tooling to the test at the same time. 

Approach to an online partnership design workshop
Because our aspiring partnering entrepreneurs were based in Kenya, and Saïda was in Boston, and I myself in The Netherlands, we needed to a workshop setup that could operate remotely. 

We chose to use miro.com as a virtual whiteboard, which was accessible to all. We used Skype as a means for talking.

Despite the often tricky internet connection with Kenya, the combination of both tech platforms worked wonderfully for the 3 hours of discussion we had together. Especially the miro board provided a very interactive, and immersive way for virtual collaboration.

During our call, we went through all the steps of the Partnership Design process (see visual below, which can be explored in more detail here). The results themselves are discussed in the next section of this blog.

Partnership Design Expressions Global - Solar Freeze
Output from the remote Partnership Design session between Expressions Global, and Solar Freeze in Kenya. (click here to explore the full virtual board)

The Partnership Design Process

-Understand-

We started discussing both partners’s business models, using the business model canvas. From there we looked at current priorities, and challenges to both businesses. 

For EG the main challenge is to find an well-paying market outlet for the farmers that use their irrigation technology. Without a well-paying market, like a higher-end domestic, or  export market, farmers are less inclined to invest in their crops with irrigation. 

SF is looking to expand their presence in the market, building new units, and connecting with new farmer groups who would use storage for their fresh products. 

-Intent-

Next we explored both partners’ intent to collaborate; why do they need help from a partner to to achieve their priorities?

EG is in need of cold storage capacity in the supply chain of their farmers. That is key to access high-end markets, as it keeps produce fresh during shipment. However, investing in their own cold storage would be expensive, and it would detract from their core business, which is irrigation. It would be better to work with a partner that is specialised in storage facilities.

SF is in need for new farmers to collaborate with. But building those relationships is hard. It would make more sense to collaborate with an organisation that already has those relationships in place.

So it turned out, both EG, and SF have matching priorities, and also need collaboration to achieve them. EG needs cold storage, and access to higher-end marktes, which SF can offer. And from its end, SF needs access to organised farmers, which EG can offer. This is a solid basis for delving further into the design of their partnership.

-Design & Compare-

Using the Partnership Canvas we started discussing the setup of the collaboration. For EG it was clear what value the partnership needed to create. A cold storage unit, on site, near the farmers that they work with. 

One of the key assets that SF needed to realise the construction of their cooling unit was to have land available to place the unit. Peter said that through EG’s relationship with local landowners this could easily be arranged. Also this relationship could provide for security. Operationally it seemed possible to place a functional cooling unit.

The remaining question now was how SF could tie relationships with farmers, so that they would start using the cooling storage facility. Both Dysmus and Peter explained how farmers need to improve their production practice to meet the higher production standards, and how training of farmers was key. 

For that reason they thought that it would be appropriate to design a joint training for export markets for farmers, where Peter’s standard training on Good Agricultural Practices could be combined with a Post-Harvest Management content based on Dysmus’ experience. This training could be a way for SF to acquire new farmer-customers for the storage unit.

The Created Value form the partnership is labelled with yellow on the whiteboard

-Evaluate-

Now that the design for the collaboration was made apparent with the Partnership Canvas, we looked at the big questions that needed to be answered for the collaboration’s business case; the hypotheses behind the partnership (those are labeled in red on our whiteboard). 

For EG, the big question was whether the cold storage unit in combination with the training would lead farmers to dedicate more acreage to high quality (exportable) crops, and supply the (stable) volumes of that product . The needed increase in acreage, and productivity could be achieved through the EG’s irrigation service, which would mean more revenue for the business. Also, Peter expected that EG would be able to generate more revenue from commissions, as an intermediary in the trade between farmers, and exporters. 

SF had questions about how the training would influence utilisation rates of the storage units. The training would need to lead to new numbers of farmers that would use the unit, and an increase in the volume of product that they would store. This would impact revenue growth from the storage service.

These were questions about conversion from the farmer training to paying customers for storage on the one hand, and then on the other hand about productivity, and volumes of product that these customers would actually store in the cooling unit.  

Conclusion
The case for partnering turned out to be clear. The assumptions were reasonable, and if they were to be true, both business would benefit from the collaboration. 

The partnership seemed ready to move into action mode, testing the hypotheses in a pilot project. And an obvious first thing to start with would be the farmers trainings, which could even start before building the cooling units. Implementing the training would answer questions that both EG, and SF were facing. But despite this obvious first step Peter, and Dysmus hadn’t started their joint project yet. 

When digging into the issue, it turned out that Dysmus had made a wrong assumption in his numbers behind SF’s growth. Where initially he thought that SF could finance placement of new cooling units through its own profits, growth actually required external funding. So, SF’s arranging of funding turned out to be a very important missing priority in the partnership discussion, and was the cause for the hold-up. 

This piece of information also increased the importance of utilisation rates for SF’s cooling units, and whether the farmers’ training would actually lead to more farmers signing up, higher productivity of their crops, and more supply to the cooling units. This would be critical for financial viability of SF to bring return on investment of new cooling units.

This additional pressure on the numbers increased the risk to the partnership. Yet even more so, it pointed to the importance of starting of the joint training as that would provide key insights needed to confirm (or invalidate!) the business case in this early stage of the partnerhip. 

We left the conversation there, with a clear next step for Peter, and Dysmus to follow-up on. As for the result of the Partnership Design process, it pointed to the importance that a good preparation by laying out the starting situation of both businesses is critical for achieving momentum in partnering. If information is missing  in this orientation stage, the partnership will likely run into delays.

We’ll be sure to check in again with the EG-SF partnership again soon to see what insights the implementation of the training has brought. 

[PS. Upon reviewing this article, Peter explained that the partnership has run into an additional challenge, namely that exporters demand graded produce. They were assuming that cold storage was their only impediment.

So, despite having the relevant contacts with exporters in place, they still need to work out how to jointly fulfil the exporters’ product, and packaging requirements. The partnership now needs to involve sorting, and packaging facilities, which neither EG nor SF currently has.

Will it be a joint investment? Or will it be assigned as a responsibility to either of the partners individually? What are your thoughts? – Leave them in the comments below 👇]


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Strategic Intent and Creating Value in Partnerships

This last summer I was fortunate enough to sit by the Lausanne lakeside with Alexander Osterwalder, and Alan Smith, co-authors of Business Model Generation, and Value Proposition Design, to review my progress on the Partnership Canvas.

The Partnership Canvas has been gradually spreading throughout the world. I’ve been able to make countless observations on how business practitioners use the tool, how they interact, working in teams, and how the canvas helps to structure a process for collaborative innovation. So, it was high time for some reflection.

A question on Strategic Intent
The discussion with the Alex, and Alan was one that lies at the hart of the issue of creating value through partnerships, namely about its connection to strategic intent.

The experienced business tool makers quickly honed in on the Created Value building block of the Partnership Canvas. They pointed out the necessity of emphasising the relation between a defined strategic intent and the created value in a partnership. These need to be aligned for partnerships to contribute to the core strategic priority of the organisation.

Alex, and Alan’s question on the Partnership Canvas was whether strategic intent, and created value were actually the same thing, or if they were different. I could relate this question to behaviour I’ve seen in workshops with regards to the created value building block, where people tend to conflate intent statements with created value from the partnership.

This question made me realise that the distinction, and the relation between strategic intent, and created value in the Partnership Design process is not obvious, and needs to be addressed explicitly to make the Partnership Canvas more intuitive to apply.

Defining Strategic Intent
Strategic intent is defined by two assessments: Firstly there’s the business model SWOT assessment, which takes into account the interaction between the business environment, and the business model: what are the opportunities, and threats that the business model is facing?

Secondly, defining intent involves understanding the vision behind the business model, and assessing whether there is still a fit between that vision and how the business model is currently set up.

The statement of strategic intent flows from these two assessments. The intent statement explains why to change the business model, and in which direction to take that change.

What is the Created Value of a Partnership?
The created value building block of the Partnership Canvas constitutes the output of the collaboration. By combining value inputs from both partners in a collaboration activity, value is transferred between them. This collaboration enables the creation of a new form of value for each partner, which they can apply to their business model.

Putting Strategic Intent, the Partnership’s Created Value, and Business Model Innovation together
The value that a partnership needs to create is consequent to the definition of strategic intent. Whether the value created in the partnership actually succeeds in serving the strategic intent, is determined by the business model.

“Value is created in the partnership, but needs to captured in the business model”

The created value from the partnership could for instance be an expansion, or deepening of a value proposition, or building a channel together with your partner. But it isn’t until this created value is put to work, that you’ll find out whether you’ll actually meet the objectives you set out with.

So, rather than equating created value from a partnership to strategic intent, the created value is actually the bridge between the intent the business model innovation starts out with, and the outcome of that journey.

Intent-Outcome
Intent ——- Created Value ——- Outcome

An example visualising the link between strategic intent, and creating value in a partnership
To demonstrate the logic of linking strategic intent to the created value of a partnership, I’ll give a partnership example below.

This example concerns the partnership between IBM, and Apple, announced in 2014. For IBM, the strategic intent was to improve their users’ experience, by offering their enterprise-grade secured software on a more user-friendly, and better designed device.

IBM’s business clients’ employees were already carrying their own Apple devices into the office setting, because they preferred Apple’s technology over the non-Apple devices that their employer would equip them with. But there was no way to formally support these devices within the office setting, because IBM couldn’t access them. The partnership, however, enabled IBM to deepen their value proposition by getting access to Apple’s superiorly designed hardware, on which they could run their enterprise-grade secured software.

Apple_IBM
The created value from the IBM-Apple partnership design

For Apple, the intent of the partnership was to get a stronger positioning in the enterprise market for their devices. Essentially Apple is designed to serve a consumer market, which puts the company in a juxtaposition to serving an enterprise market.

Through the partnership with IBM, Apple created the channel they need to sell their computer devices to enterprise customers. This was a breakthrough channel for Apple to the enterprise market, something that might have cost them a decade to build themselves, if they were to achieve it at all.

The question for this partnership does remain how it’s performing up till now. But a peak onto Apple’s website shows that they’ve started engaging with more enterprise partners, expanding the area of application of their devices; an indication that things are moving ahead.

Conclusion
Alex, and Alan’s question on strategic intent in partnerships touched on an issue that I implicitly address when I apply Partnership Design. But having the question on the link between intent, and created value pointed out explicitly, enlightened my thinking on building the strategic argument for partnering, and helping to drive the partnering process towards its intended innovation objective.

The importance of understanding that the created value of a partnership is the bridge between intent, and the business model innovation can’t be overstated. Because being able to get an agreement on a partnership doesn’t imply that you’re also able capture the value that you intended for.

It will always require (repeated) effort to test whether the value from a partnership can actually be captured. The conclusive pass of fail mark for the partnership can only be given after several stints of disciplined business experimentation.

(A great many thanks to Alex, and Alan for the discussion, and taking out the time to dig into the Partnership Canvas!)


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